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| − | Expatriate Tax Preparation and Understanding Exclusion of Foreign Earned Income
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| − | [http://expatriation.qapacity.com/my-blog/513121/expatriates-on-korea--things-to-expect/ what is expatriation] There is much confusion about what constitutes foreign earned income with regards to the residency location, the location where the work or services are performed, and the source of the salary or fee payment. Foreign residency or long periods abroad from the tax payer is really a qualification to avoid double taxation.
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| − | Moreover, foreign source income is for services performed away from U.S. If a person resides abroad and works for a company abroad, services performed for that company (work) on a trip on business in the U.S. is recognized as U.S. source income, and isn't susceptible to exclusion or foreign tax credits. Additionally, residual income from the U.S. source, such as interest, dividends, & capital gains from U.S. securities, or U.S. property rental income, is also not subject to exclusion.
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| − | Conversely, earned income abroad, and residual income from foreign securities, rental, or other activities abroad, can be excluded from U.S. taxable income, or foreign taxes paid thereon, can be used as credits against U.S. taxes due.
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| − | Basically, the IRS recognizes that income earned abroad is taxed through the resident country, and may be excluded from taxable income by the IRS if the proper forms are filed. The origin from the income salary paid for earned income has no effect on whether it is U.S. or foreign earned income, but rather where the work or services are performed (as in the illustration of a worker working for the U.S. subsidiary abroad, and receiving his pay check in the parent U.S. company from the U.S.).
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| − | So, Who Qualifies for Exclusion?
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| − | Generally there are two methods of expatriates to qualify for exclusions of foreign earned income:
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| − | Probably the most easy way is to file a special form whenever throughout the tax year for postponement of filing that current year until a full tax year (usually calendar) continues to be completed in overseas as the taxpayers principle place of residency. This really is typical because one transfers overseas in the center of a tax year. That year's taxes would only be due in January following completing the following twelve month abroad following the year of transfer.
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| − | The 2nd way is to become overseas any 330 days in each full Year abroad. These periods can overlap in the event of an incomplete year. In this case the filing due date follows the completion of every twelve month abroad.
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